- Although the worst-case outcomes for the investing in the S&P 500® Index seem uninviting, the index has provided reasonable returns the vast majority of the time.
- The worst-case 5-year holding period for the index produced an annualized real return of -13.233%; however, over 80% of the time the 5-year holding period produced a positive real (inflation-adjusted) return.
- Further, the worst-case 45-year holding period for the index produced an annualized real return of only about 3.5%; however, 90% of the time the 45-year holding period produced a solid annualized real return of close to 5% or better.
Continue reading “Why Invest Forever? (Part 4)”
- Since 1973 the S&P 500® Index has posted considerable gains—over this period the index has averaged over 10% per year in gains after reinvesting dividends, before taxes and fees.
- However, investigating other 45-year periods (going as far back as 1871) leads to a more useful picture of the index’s performance across differing economic environments.
- According to history, it’s better to invest in the index over longer periods in order to increase the likelihood of providing favorable returns and decrease the likelihood of losing money.
Continue reading “Why Invest Forever? (Part 3)”
- The opportunity cost associated with the poor timing of initial investment allocations can be significant.
- After missing out on a period of good performance some investors may be further compelled to employ additional timing measures that can further exacerbate underperformance.
- Market timing, the tactical timing of when to be invested and when not to, although sensible at a high level, is far easier said than done.
Continue reading “Market Timing 101 (Part 1)”
- Research suggests that less than one percent of professional active manages are “skilled” at what they do.
- Given this, the odds of picking a solid active manager is not just slightly worse than a coin toss; in fact, the chances are closer to slim to none.
- Therefore, a passive investing strategy may be more sensible over the long run for most investors.
Continue reading “Passive is the New Aggressive (Part 7)”